Nikkei Rebounds 1% as CPI Falls 1.1%

Chandrasekhar Atreya
27 Aug, 2010
New York City

The benchmark index in Japan dropped to a new intra-day low but managed to gain nearly 1% by close. For the week the index declined 2.1%. Core consumer price index fell for the seventeenth month in a row. Unemployment rate dropped in July. Toyota recalls extends to Corollas.

[R]5:00 PM Tokyo, Japan – The benchmark index in Japan dropped to a new intra-day low but managed to gain nearly 1% by close. For the week the index declined 2.1%. Core consumer price index fell for the seventeenth month in a row. Unemployment rate dropped in July. Toyota recalls extends to Corollas.[/R]

Tokyo benchmark index dropped as low as 8,800 at the end of morning session but managed to regain most of the losses by the close of trading.

The Nikkei 225 Stock Average gained 0.95% or 84.58 to close at 8,991.06. The broader Topix also gained 1% to 819.62. For the week, the Nikkei index dropped 2.1% and the Topix index declined 1.2%.

Japan’s consumer prices fell for the 17th month in a row in July but unemployment rate declined.

Core consumer price index fell 1.1% in July from a year earlier, government data showed Friday, in another sign that the country’s economy remains mired in deflation. The fall marked the 17th straight month of decline and was in line with the median forecast of 1.1% drop in a poll of economists by Dow Jones Newswires and the Nikkei. The core CPI, which excludes fresh food prices, slid 1% in June.

Core CPI for the Tokyo metropolitan area, a leading indicator of national trends, fell 1.1% in August, the Ministry of Internal Affairs and Communications said, slightly better than the expected 1.2% drop.

Seasonally adjusted unemployment rate in Japan fell to 5.2% in July from 5.3% in June, marking the first decline in six months, the Internal Affairs Ministry reported Friday. The number of people without jobs stood at 3.31 million, down 280,000 from a year earlier, making it the second straight monthly drop.

The number of employed increased by 10,000 to 62.71 million marking the first increase in 30-months.

More than 60% of manufacturers foresee a profit decrease due to the yen’s rise against the dollar, while more than 50% see the same result due to the currency’s gain against the euro, according to a government survey released Friday.

In a survey conducted from August 11 to August 14, the Ministry of Economy, Trade and Industry, asked 200 companies, 102 large ones, mainly manufacturers exporting their products, as well as 98 small and medium sized businesses on how the yen’s strength will affect them.

The government confirmed at a cabinet meeting on Friday that it will draw up measures by the end of August to stem the rise of the yen and boost the economy.

A total of 73% of top business chiefs and experts say that additional stimulus measures are a must, according to a survey, conducted from August 19 through Thursday, by the Japan Business Federation, or Nippon Keidanren. An appropriate response to the strong yen by the government and the central bank, including foreign currency intervention, topped the list of stimulus with 54.1% calling for such an action.

Toyota Motor Corp Thursday announced it would conduct a safety recall involving about 1.1 million Corollas in North America to address engine control modules defect that may have been improperly manufactured.

The automaker said the recall would affect 2005-2008 Corolla and Corolla Matrix vehicles.

The Ministry of Health, Labor and Welfare said Thursday it is asking for a hike in the cigarette tax under its fiscal 2011 tax reform proposals. This would make it a second straight year of hikes, following October’s increase of 3.5 yen per cigarette.

The new hike is intended to encourage public to cut down on smoking for health reasons, said the Ministry.

Resona Holdings Inc said Thursday it will repay 400 billion yen of public funds by buying back its preferred shares held by the government. After this repayment the bank will still owe 1.68 trillion yen.

A 6.43% premium has been added to the purchase price, pushing the total cost to 425.7 billion yen. The move will likely lower its consolidated capital adequacy ratio by around 2.17% to 14.49% as of the quarter ended June.

Kirin Holdings Co, Japan’s biggest beer maker, agreed to pay 11.1 billion yen in stock swap to take full control of wine unit Mercian Corp, which earlier this year said it misstated earnings.

Kirin will pay 0.14 of a share for each share in Mercian, the two companies said in a joint statement today. That values Mercian at 12% more than Thursday’s closing price. Kirin bought 50% of Mercian shares in 2006.

Shipments of rolled aluminum products gained 7.8% in July from a year earlier, growing for the eighth consecutive month, as sales to domestic automakers and exports to Asia increased.

Supplies for exports and domestic markets rose to 179,619 tons from 166,610 a year earlier, the Japan Aluminum Association said in a statement Friday. The pace of growth slowed from 14% in June.